What is a right issue of shares?

A right issue is an offer of new shares to the existing shareholders of a company in proportion to their current shareholding, unless the offer is renounced or handled as permitted by law and company documents.

Is right issue allowed for a private limited company?

Yes. A private limited company can issue shares through rights issue by following Section 62 of the Companies Act, board approval, offer notice, acceptance records, allotment and ROC filing.

Why do companies use a rights issue?

Companies commonly use a rights issue to raise fresh capital from existing shareholders while maintaining existing ownership proportions and reducing disputes around dilution.

Is rights issue the same as private placement?

No. Rights issue is an offer to existing shareholders. Private placement is an offer to identified persons under a different compliance route.

Does a rights issue change shareholding percentage?

If all shareholders subscribe in proportion to their holdings, percentages generally remain the same. If some shareholders decline or renounce and others subscribe, shareholding percentages can change.

Which section governs rights issue in India?

Rights issue is mainly governed by Section 62 of the Companies Act, 2013, along with the Companies (Share Capital and Debentures) Rules and the company’s Articles of Association.

Is shareholder approval always needed for a rights issue?

A normal proportionate rights issue is generally approved by the board. Shareholder approval may be needed depending on the structure, AOA, preferential terms or if the issue is not strictly proportionate.

Can rights issue be made at premium?

Yes. Shares can be issued at premium if valuation, pricing basis, accounting treatment and board records are properly maintained.

Can rights issue be made at face value?

Yes. Shares may be issued at face value if commercially and legally appropriate. Pricing should be backed by records and should not create tax or valuation concerns.

Can a startup use rights issue to bring more money from founders?

Yes. Startups and private companies often use rights issue to bring additional founder capital if the route is suitable and properly documented.

What documents are required for rights issue?

Key documents include board notice, board resolution, offer letter, list of shareholders, entitlement ratio, acceptance/renunciation records, bank proof, allotment resolution, list of allottees and PAS-3 attachments.

Is offer letter required for rights issue?

Yes. Existing shareholders should receive a rights offer letter or notice stating number of shares offered, price, offer period, right to renounce if applicable and acceptance procedure.

Is valuation report required for rights issue?

Valuation may be required or strongly advisable where shares are issued at premium, where tax exposure exists, or where the company wants clean due diligence records.

Is bank proof needed for allotment?

Yes. Proof of share application money received in the company bank account is important for allotment records and future audit/due diligence.

Is list of allottees required for PAS-3?

Yes. PAS-3 requires allottee details and supporting attachments such as allotment resolution and list of allottees.

Is PAS-3 required for rights issue?

Yes. After allotment of shares through rights issue, the company files return of allotment in Form PAS-3 with the Registrar of Companies.

What is the due date for PAS-3 after rights issue?

For most non-private-placement allotments including rights issue, PAS-3 is generally filed within 30 days from the date of allotment.

Is MGT-14 required for rights issue?

MGT-14 applicability depends on the company type, resolution and specific transaction structure. It should be checked before filing rather than assumed in every case.

Can PAS-3 be filed without allotment resolution?

No. PAS-3 should be backed by a proper allotment resolution and allottee records.

Will MCA master data show increased paid-up capital after PAS-3?

Yes, once the allotment filing is processed, paid-up capital records should reflect the updated position subject to correct filing and MCA processing.

How long does a rights issue process take?

A simple rights issue may take a few weeks depending on board approval, offer period, shareholder acceptance, money receipt, allotment and PAS-3 filing.

What is the minimum offer period for rights issue?

Offer period requirements depend on Section 62, shareholder consent for shorter notice and company documents. The timeline should be planned before sending the offer.

Can rights issue be completed urgently?

Yes, in many private company cases an urgent route may be possible if shareholders cooperate, documents are ready and shorter period consent is legally available.

When should allotment be done in rights issue?

Allotment should be done after receipt of valid acceptance and share application money, within the planned offer and board process.

What happens if PAS-3 is filed late?

Late filing can attract additional fees and compliance exposure. It may also delay clean capital records and affect due diligence.

What is the difference between authorised capital and paid-up capital?

Authorised capital is the maximum share capital the company can issue under its MOA. Paid-up capital is the amount actually issued and paid by shareholders.

Can rights issue exceed authorised capital?

No. Authorised capital must be sufficient before allotment. If not, the company should first increase authorised capital.

Can a company issue rights shares at premium?

Yes. The premium amount goes to securities premium account and should be properly recorded in financial statements.

Can partly paid shares be issued through rights issue?

Possible, but terms must be clearly structured, recorded and compliant. Many small private companies prefer fully paid shares for simplicity.

Is stamp duty applicable on share certificates?

Stamp duty may apply on issue of share certificates as per applicable state and stamp law. This should not be ignored after allotment.

What is the biggest mistake in rights issue?

The biggest mistake is issuing shares informally without proper offer, acceptance, money trail, allotment resolution and PAS-3 filing.

Can wrong share ratio create disputes?

Yes. If entitlement is wrongly calculated or some shareholders are not properly offered shares, minority disputes can arise.

Can rights issue be challenged by shareholders?

Yes. Shareholders may challenge the issue if the process is unfair, notice is defective, valuation is questionable or dilution is abusive.

What if share application money is received before proper process?

The company should regularise records carefully and check whether deposit-related, accounting or compliance concerns arise.

Can unpaid ROC filing affect funding?

Yes. Investors, banks and acquirers review capital filings. Missing PAS-3 or weak allotment records can delay transactions.

Is rights issue useful for founder funding?

Yes. It is commonly used when existing founders or shareholders want to put more capital into the company.

Can rights issue be used before investor funding?

Yes, but cap table impact, valuation and investor due diligence should be planned carefully.

Can a shareholder renounce rights shares?

Renunciation may be possible if permitted by the offer terms, AOA and applicable law. It should be documented clearly.

Does rights issue require updating share certificates?

Yes. After allotment, share certificates should be issued and statutory registers updated.

Can CompanyJi handle the full rights issue process?

Yes. CompanyJi can help with board documents, offer letter, acceptance records, allotment, PAS-3 filing, share certificate guidance and post-filing compliance.

rights-issue - Smart Business Solutions

Complete Rights Issue Guide

Rights Issue Is More Than Taking Money from Shareholders.

A clean rights issue needs correct entitlement ratio, offer documentation, board approval, acceptance records, bank trail, allotment and ROC filing.

Rights Issue Support

Before issuing shares, we check capital limit, shareholder entitlement and PAS-3 readiness.

Rights issue is useful for founder funding, working capital, expansion and cap table clean-up. The process must be documented properly so future investors, auditors and banks do not question the capital increase.

✓Check authorised capital before planning the offer.

✓Prepare entitlement ratio, offer letter and shareholder acceptance records.

✓Track share application money with clear bank proof.

✓Draft allotment resolution and file PAS-3 with ROC.

✓Guide on share certificates, registers and post-allotment capital records.

16 registrations started today — limited expert slots

🔒 Confidential ✓ No hidden fees ✓ No obligation

Why This Matters

A Rights Issue Must Be Clean for Shareholders, ROC and Future Due Diligence.

A rights issue directly changes the company’s paid-up capital and shareholder position. If the process is informal, it can create disputes and due diligence delays.

💰

Raise capital cleanly

Bring additional funds from existing shareholders through a structured legal route.

👥

Protect shareholder fairness

Offer shares proportionately and reduce dilution disputes among existing members.

🏛️

ROC capital update

PAS-3 filing updates the allotment record and supports paid-up capital changes.

📈

Startup founder funding

Useful when founders want to invest more capital before loans, grants or funding rounds.

🔍

Due diligence ready

Clean offer, acceptance, bank and allotment records help in audits and investor checks.

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Register discipline

Share register, certificates and capital structure should align after allotment.

Eligibility Snapshot

When Rights Issue Is the Right Route.

Rights issue works best when the company wants capital from existing shareholders, not from a completely new investor group.

Suitable Cases

Use Rights Issue When

InvestorsExisting shareholders

Capital needBusiness funding

OwnershipProportionate offer

FilingPAS-3 after allotment

Best forClean shareholder funding

Check Before Issue

Do Not Start Without

Authorised capitalSufficient limit

Shareholder listUpdated register

Offer termsClear price/ratio

Money trailBank proof

AllotmentBoard resolution

Documents Required

Documents Needed for Rights Issue and PAS-3 Filing.

The exact document pack depends on the company type, AOA, pricing, shareholder consent and whether any shareholder renounces their rights.

Before Offer

Latest shareholding pattern
Authorised capital details
Board meeting notice
Draft board resolution
Rights offer letter
Entitlement ratio working

During Subscription

Shareholder acceptance forms
Renunciation documents, if any
Bank proof of application money
Updated allotment sheet
Valuation/pricing note, if needed
Share application records

After Allotment

Allotment board resolution
List of allottees
PAS-3 attachments
Updated register of members
Share certificate records
Stamp duty support where applicable

5-Step Process

How CompanyJi Handles Rights Issue Compliance.

We structure the rights issue from cap table review to PAS-3 filing so the company has a clean ownership and capital record.

Capital Review

We check authorised capital, paid-up capital, existing shareholders and AOA restrictions.

Offer Drafting

We prepare board papers, entitlement ratio and rights offer letter.

Acceptance + Money

We organise acceptance, renunciation records and share application money proof.

Allotment

Board approves allotment and allottees are finalised with share numbers and value.

PAS-3 + Records

We file PAS-3 and guide register, share certificate and post-allotment compliance.

Compare Before You Decide

Rights Issue vs Private Placement vs Preferential Allotment.

Choosing the wrong share issue route can create filing errors, shareholder disputes and valuation concerns.

Parameter

Rights Issue

Private Placement

Preferential Allotment

Offered to

Existing shareholders

Identified persons

Selected persons/investors

Main purpose

Shareholder funding

External/private capital

Strategic allotment

Dilution risk

Lower if subscribed proportionately

Can dilute existing holders

ROC filing

PAS-3 after allotment

PAS-3 and private placement records

PAS-3 and approvals

Best for

Existing shareholder contribution

New investor funding

Targeted allotment

Everything You Need to Know

Rights Issue FAQs

Detailed answers on rights issue, Section 62, offer letters, shareholder entitlement, PAS-3 filing, timelines, pricing, authorised capital, penalties and practical cap table issues.

Planning a rights issue? Make the capital record investor-ready.

Share your current shareholding, authorised capital, proposed amount and shareholder plan. CompanyJi will guide the clean rights issue route and complete the ROC filing professionally.

Request Rights Issue Consultation →

FY 2026-27 Compliance Calendar

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Right Issue of Shares